By Nicholas Bariyo


Uganda's central bank increased its benchmark lending rate to 9% from 8.5% on Friday as the East African nation continues to tighten its monetary policy to curb spiralling inflation.

Michael Atingi-Ego, deputy governor at the Bank of Uganda, said inflation jumped to 7.9% in July from 6.8% the previous month. An aggressive monetary policy response is needed to calm price pressures, which continue to spark intermittent street protests across the country, Mr. Atingi-Ego added.

"The economy continues to face strong cost push inflation pressures from the external environment," Mr. Atingi-Ego, said "The inflation outlook is driven by lagged impact of higher exchange rate depreciation, dry weather and a complete pass-through of the global inflationary pressures."

The rate hike was the third in a row, and wasn't surprising to analysts, who had predicted that headwinds, occasioned by higher food and energy prices will continue to pressure Uganda, which is the largest Africa coffee exporter.

"Higher global food and energy prices continue to accelerate inflation, dampening the outlook," said in a note Yadhav Panday, a forex dealer with Nairobi-based AZA Finance. "Increased dollar demand from oil importers is also likely to weaken Uganda's currency against the greenback in the coming days."

Mr. Atingi-Ego said that the central bank will continue to increase the interest rates to ensure that inflation reverts to its medium-term target of 5%.


Write to Nicholas Bariyo at Nicholas.Bariyo@wsj.com


(END) Dow Jones Newswires

08-12-22 0812ET